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RelayRides Founder in the Hot Seat

Peer-to-peer car-sharing company RelayRides announced Monday it is going national, the first peer-to-peer car-sharing program to do so. I sat down with RelayRide’s founder Shelby Clark and asked him my burning questions on the peer-to-peer car-sharing model.

SC: We’ve had a healthy dialogue with Scott Griffith, the CEO of Zipcar, for a long time and we’re on great terms. I’m excited to see Zipcar get involved with peer to peer. Zipcar has a really strong focus on universities, where Wheelz is. Zipcar is a competitor, but there are way more people that don’t car share than those who do. There are 260 million cars on the road in the U.S. and 1.2 cars for every licensed driver. There are less than a million car-sharing members; that’s less than half a percent of car drivers in the U.S. It’s just incredibly wasteful.

ARN: Why go national now?

SC: We launched almost two years ago in Boston, and since then we’ve been saying “no” to many people in other parts of the country. We’ve wanted to stop saying no.

ARN: How will you deal with the first handful of RelayRides car sharers in a new market? It may be difficult to connect car owners with renters.

SC: In the early days there will be areas where we don’t have really strong coverage. But RelayRides is an inherently viral marketplace, where renters want to see more cars and owners in the marketplace. People really connect with what we’re doing. They get really enthusiastic. They like telling their friends and neighbors. We’ll see growth through strong word of mouth. And we’re trying to make it as easy as possible to get a car up and running in the system. That’s why we’re launching this key-exchange program. It’s the absolute easiest way to get a car off and running and available to rent in less than five minutes. We want to make this process really frictionless.

ARN: Only three states have regulations (pending the Washington State governor signs a recently passed bill) for which insurance companies officially recognize that their insureds are renting their cars. How do you feel about moving into states that don’t have those laws?

SC: The legislation is nice to have but not necessary. It helps consumers become more comfortable with a new idea, because it’s been considered by their legislature as being safe and good for consumers.

ARN: But renting a car is considered commercial usage.

SC: Your personal auto policy does not cover commercial usage of your car, but it doesn’t mean that using your car for commercial purposes has any real impact on your coverage. To give you an example: A pizza delivery boy and realtor are considered commercial usage of your vehicle, as is renting your car out through RelayRides. You need a different auto policy to [cover commercial usage], which is why RelayRides has a $1 million insurance policy on every reservation. But that said, State Farm doesn’t go around cancelling every pizza delivery boys’ insurance policy. They could drop you, but it’s pretty unlikely. We’ve been operating in Massachusetts for two years now without a single problem. The law makes it really clear that renting your car out is legal.

ARN: The laws are written such that the car owner can’t make more than his or her costs. Will that pose a problem?

SC: Yes, your earnings can’t exceed your costs. But you have a lot of things that can be considered car expenses; depreciation, gas, even an iPod connection. If you do exceed the earnings, it’s not the end of the world. You would no longer have those protections, so the worst case scenario is the insurance carrier would drop your coverage. It hasn’t happened yet; we’re confident it won’t happen, and the downside is pretty manageable.

ARN: What is the oversight?

SC: The law doesn’t specify reporting, so we’re not providing our detailed user information to insurance companies. It’s not entirely clear how they would enforce it.

ARN: Have you had any claims on your policy yet?

SC: We have had some claims and there haven’t been problems. We’re really confident that our insurance will hold up.

ARN: Have you had any cars stolen?

SC: We have not had any cars stolen to date. All the cars that we have right now have GPS. With [our new agreement with] OnStar, it has GPS and the system can slow the car to a stop so it can be recovered.

ARN: But moving forward those vehicles that don’t have OnStar will have to be part of the key-exchange program. Isn’t that risky?

SC: We encourage the car owner to check the renter’s driver’s license when they meet them. We have a lot of ways to triangulate the information online and then you have the in-person backup as well.If we know who you are, we know your identity and we have your credit card info and address, it’s very unlikely that you’ll run off with the car. [PAGEBREAK]

ARN: The theft of exotic sports cars put [luxury peer-to-peer car sharer] HiGear out of business. Does that make you worried?

SC: The HiGear incident was definitely unfortunate, but it was a good thing for the industry to understand what the risks are and to know that we’re thinking about how to protect our members. The area we’re concerned with the most is fraud and identity theft. Our goal is to have best in class identity theft protection.

ARN: But are your security checks and balances better than HiGear’s?

SC: I know the owners of HiGear. We knew about what happened before the rest of the industry did. We had a close dialogue with them. They admitted they were weak on fraud and identity theft. Some basic checks would have prevented the gross fraud they experienced. We’ve learned a lot from them and have made sure we’ve got the best-in-class, cutting-edge fraud and identity theft and we’re very confident in our system.

ARN: RelayRides does not own the car, but it brokers the transaction. Where do you think you factor into liability?

SC: What’s most important to us is that the renters and car owners are protected. Some of these issues are untested in insurance regulation and actual case law. But what is clear is that the liability is not on the renter or the owner, and that RelayRides is standing there to make sure that our members are protected.

ARN: They would be protected up until your insurance’s policy limits [$1 million, $500 deductible]. Would that leave the door open for a lawsuit with greater damages?

SC: There certainly is the potential for that. I think that the liability does lie with RelayRides in that case.

ARN: How do you manage contested claims?

SC: It can be tricky to determine how the damage was caused and by who, so we deal with these on a case-by-case basis. At first we’d like the community to resolve these issues themselves. We encourage remediation and dialogue among the members. In certain cases we have to step in and mediate. We use all the information we can. We look at your history with RelayRides and what kind of member you’ve been and how long you’ve been around for. A lot of factors can help us make the best decision in an unclear scenario.

ARN: What happens if a renter breaks down?

SC: We have a 24-hour roadside assistance nationwide, so you’re covered wherever you go. I’ve had rental cars that have broken down. I don’t see this as any different. This is what will be great about a nationwide marketplace, eventually you’ll have cars very close by to wherever you are.

ARN: What is motivating the move toward a key-exchange policy? It seems that this policy is moving away from where the industry is going with technology.

SC: Installing the hardware in every car is a big expense. That’s why we’re going with OnStar and the key exchange. But we’re not moving away from electronic access because 6 million cars with OnStar will be RelayRides-ready with the push of a button.

ARN: As the peer-to-peer market matures and becomes more commonplace, do you think people will treat the cars worse than they do now? Will the good will erode?

SC: I don’t think so. One of our main jobs at RelayRides is to make sure that the community stays ‘safe and well lit.’ We recently hired a CEO and I’ve moved into the role of chief community officer. I think community is so important; I’m devoting all my time and energy to making sure we’ve got a strong, safe community.

ARN: How are you doing that specifically?

SC: You have a reputation on RelayRides and it’s meaningful. Peer-to-peer reputation is one of the biggest buzzwords right now. There’s a lot of dialogue around making sure that your reputation travels with you. If you’re coming into RelayRides and you’ve been sharing your apartment on Airbnb [a peer-to-peer accommodations company] and you’ve been a really great host or traveler, how do we bring that information into RelayRides? On the other side, if you were that .1% that didn’t respect the marketplace, how do we keep you out of RelayRides?

ARN: Are there any other checks and balances?

SC: We emphasize at every step that this car belongs to a person. There’s a photo of you next to the car. If you do a key exchange, you meet the owner and look him in the face. The fact that the car belongs to a person is not lost on people. They like the fact that their money is going to a person with a face and a name instead of a big corporation. And so they treat the car really well. There are times when the renter returns the car in better shape than they found it. At a fundamental level, we really haven’t had people not respecting each other’s cars.

When we’re in the middle of a hype maelstrom, it’s hard to separate the fads from the revolutions. Fleets don’t need to be first adopters, but those forming their strategies now will able to take advantage of the truly transformative solutions.